Which one of the following is not a characteristic of property, plant, and equipment?

They are acquired for use in operations.

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They are long-term in nature and are always subject to depreciation.

They possess physical substance. All of the options are characteristics

Land costs include all of the following except: closing costs such as attorney's fees. assumption of any liens and mortgages. special assessments for street lights.
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All of the options are land costs

The cost of buildings should include all of the following except: excavation costs. overhead costs incurred during construction.
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costs of removing an old building on the new building site.

building permits.

Overhead costs related to self-constructed assets are accounted for by: assigning no fixed overhead to the asset. assigning a portion of all overhead to the asset.
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assigning a pro rata portion of fixed overhead to the asset. allocating overhead on the basis of lost production.

A pro rata portion of fixed overhead should be assigned to the self-constructed asset because a better matching of costs and revenues results.

The approach for interest costs incurred during construction recommended under GAAP is to: capitalize a pro rata portion of all costs of funds employed. charge construction with all costs of funds employed, whether identifiable or not. capitalize no interest charges during construction.

resp_3

capitalize only the actual costs incurred during construction

The interest capitalization period begins when: activities to get the asset ready for its intended use are in progress. expenditures for the asset have been made. interest cost is being incurred.
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All of the options are necessary

The interest rate(s) used in computing avoidable interest is the: rate incurred on specific borrowings. lower of the rate incurred on specific borrowings or the weighted average rate.
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rate incurred on specific borrowings for the weighted-average expenditures equal to the specific borrowings and the weighted average rate of other borrowings for the excess expenditures.

weighted average rate incurred on all other outstanding debt.

Plant assets purchased in exchange for a zero-interest-bearing note should be accounted for at the: fair value of the asset received.
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present value of the note.

face value of the note. book value of the asset received

Assets acquired in a lump sum purchase should be recorded at their: fair market value.
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relative fair market values.

relative book value. appraised value

Gains on exchanges of nonmonetary assets are: recognized only on exchanges that lack commercial substance. never recognized.
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recognized partially on exchanges that lack commercial substance when cash is received.

recognized only on exchanges that have commercial substance

A nonmonetary asset acquired in an exchange that has commercial substance is usually recorded at the: book value of the asset received. fair value of the asset received.
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fair value of the asset given up, unless fair value of the asset received is more clearly evident.

book value of the asset given up.

In an exchange that lacks commercial substance in which a gain exists and cash is received, the asset received is recorded at the: fair value of the asset given up less cash received.
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fair value of the asset received less the deferred portion of the gain.

book value of the asset given up less the deferred portion of the gain. book value of the asset given up less cash received

The gain recognized in an exchange that lacks commercial substance and in which cash is received is computed by multiplying the total gain by the formula of: cash received divided by the total of cash received plus fair value of the asset received.

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cash received divided by the total of cash received plus fair value of the asset given up. cash paid divided by the total of cash paid plus fair value of the asset given up. cash paid divided by the total of cash paid plus fair value of the asset received

Expenditures that extend the useful life of a plant asset without improving its quantity or quality are accounted for: by debiting Accumulated Depreciation. as improvements. by debiting the asset account. as additions.

When plant assets are sold: only losses are recorded. a loss is recorded when the selling price is less than the asset's cost.
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a gain is recorded when the selling price is greater than the asset's book value.

only gains are recorded

All of the following are true regarding the revaluation model allowed under iGAAP except: revaluations must be made regularly to ensure that the carrying value is not materially different from fair value. after initial recognition, the revalued amount is fair value less subsequent depreciation and impairment losses. once selected, the revaluation policy applies to an entire class of property, plant, and equipment.
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when an asset is revalued, any increase in carrying amount is reported as miscellaneous revenue

Revalued assets cannot be written up above original cost

The cost of driveways, walks, and parking lots are included in the cost of land. True
resp_2

False

Land improvement
Interest revenue earned on borrowed funds during the construction of an asset to be used by a firm can be used to reduce the cost of interest to be capitalized. True
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False

When nonmonetary assets are traded in an exchange that lacks commercial substance and no cash is received, any loss is recognized immediately. True

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False

The receipt of an asset from a contribution should be recorded as additional paid-in capital. True

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False

Contributions received should be recorded as revenue in the period received

The cost of a replacement that extends the useful life of an asset should be debited to the asset account. False

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True

When an asset's useful life is extended by a replacement, the cost of such replacement should be debited to the related Accumulated Depreciation account

Land is only depreciated if it suffers a material decrease in value. True

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False

Land is not subject to depreciation unless a material decrease in value occurs, such as a loss of fertility in agricultural land
A portion of fixed overhead incurred during self-construction of an asset must be allocated to the construction process. False

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True

A portion of fixed overhead incurred during self-construction of an asset may be allocated to the construction process. Alternatively, the company may assign no fixed overhead to the cost of the constructed asset
Avoidable interest is the amount of interest cost incurred during the construction period that a company could theoretically avoid if it had not made expenditures for the asset. False
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True

If an exchange has commercial substance losses should be recognized immediately and gains should be deferred. True
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False

If an exchange has commercial substance, both gains and losses should be recognized immediately

Cash or other assets received in an exchange are referred to as boot. True

resp_2

False

Only cash received is consider a boot

Under iGAAP, historical cost is the preferred treatment for property, plant, and equipment. False
resp_1

True

The only major characteristic of property, plant and equipment shown below is: they are long-term in nature.

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they lack physical substance. they are acquired for resale. they are always subject to depreciation

The cost of equipment includes: purchase price less any discounts. freight charges. cost of conducting trial runs.
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All of the above.

Special assessments for local improvements, such as pavements, street lights, sewers, and drainage systems, are usually charged to what account? Land Improvements.
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Land.

Betterments. Building Improvements

The cost of property acquired by the issuance of securities is equal to: the original cost of the securities.

the book value of the property acquired.

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the market value of the securities.

the par value of the securities

In an exchange of nonmonetary assets that lacks commercial substance in which a gain exists and no cash is paid or received, the asset received is recorded at: book value of the asset given up plus the deferred gain.
resp_4

fair value of the asset given up less the deferred gain.

fair value of the asset received up less the gain deferred. book value of the asset received less the gain deferred

When a company sells equipment for a price that is less than the asset's book value, which of the following is recorded? Extraordinary gain. Gain. Extraordinary loss.
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Loss.

Which of the following is one of the conditions that must be present for the capitalization period of interest to begin? The construction period must occur in the current accounting period. Expenditures for the asset must be budgeted.
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Interest costs are being incurred.

Activities that are necessary to get the asset ready for its intended use must be known

The cost of the various assets acquired for a single lump sum price is determined by using their relative: historical costs. net realizable values.
resp_1

fair market values.

book values

In an exchange of nonmonetary assets that has commercial substance, when no cash is involved, the new asset is valued at:

the book value of the old asset plus the gain deferred. the fair value of the new asset plus the gain deferred. the book value of the old asset.
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the fair value of the new asset

Property received through a contribution is to be recognized at its fair market value and offset with a credit entry to a(n): Miscellaneous Gain account. Paid-in Capital account. Additional Paid-in Capital account.
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Contribution Revenue account